The actual buyout offer tendered by a given private company
for a CPC is obviously subject to negotiation, so one would do
well to keep up with the latest Qualifying Transaction valuation
multiples, or be able to ask a CPC capital markets specialist /
investment banker about the going rate for CPCs. It is important
to have an experienced professional manage the RTO process
as opposed to having your current legal counsel or existing
management undertake a CPC transaction. Time spent and
costs can increase significantly if best practices and efficient due
diligence techniques are not used leading up to the transaction
closing date.

The cost to undertake the CPC RTO process (not including the
cost of the CPC itself) on the TSX Venture is typically anywhere from
$250,000 and 3 months for the most fully-prepared companies to
$500,000 and 9 months for the companies that still need to get
their documentation together (i.e. three year’s audited financials,
technical appraisal reports, etc.) These however, do not include
any fundraising fees for concurrent private placements that may
need to be raised alongside the ‘going public’ transaction. The
costs of an RTO are also shared by the CPC to help reduce the
burden on the company.

CPC’s are formed by a group of individuals (the directors)
who wish to create a CPC to perform a reverse merger with a
qualified company. CPC’s can take 3-4 months to establish
and are started by the directors who contribute a minimum of

$100,000. They then find a broker who can assist them in raisingsome IPO funds that are then available to assist in covering thecost of the RTO process. The amount of money in the CPC,Any newly-public issuer, no matter the listing avenue, wouldstill have to qualify under the TSX-V’s guidelines and adhereto their policies, but the process is not nearly as onerous as afull-on TSX-V IPO listing. The biggest drawback of the IPO routeis its uncertainty of completion, followed by higher average fees(from $400k before fundraising fees, to $800k at the higher endof the range) which are entirely borne by the company. GenerallyIPOs are also a longer process, lasting a minimum of six monthsand going as long as a year. For issuers with less cash, the CPCroute is advantageous since the CPC’s cash can immediatelybe put towards the ‘deal fees’ necessary to complete a listing.CPC’s also help with the uncertainty of the IPO process sinceyou can strike a deal with a CPC, and as long as you meet allexchange requirements (i.e. the minimum shareholder and publicfloat requirements), you are generally assured your listing will gothrough.

Note: All financial information and timelines presented are
based on small to mid-sized companies and are only estimates.
Actual costs and timelines will depend on each particular company,
the professionals involved and their management’s abilities.

For more information contact:
David Clarke
david.clarke@nvsbancorp.com